An almost-universal truth about lawn care is that these business are very capital intensive and often require landscaping business loans to cover costs. Professional landscaping is hardly the grass-mowing chore of yore; it takes a lot more than a lawnmower and some determination to get the job done (although, true, those things help). You need tip-top equipment, a dedicated staff, and some great marketing at minimum.
Those things can be expensive. Luckily, there are landscaping business loan options.
But small business loans for lawn care aren’t always totally straightforward. Whether your business is seasonal can affect your options, as well as what, exactly, you’re looking to finance. But the good news is that you have many options, whether you’re looking for landscaping equipment financing or even a government-based SBA loan.
Before you start applying for landscaping business loans, let’s go through a few different questions.
First, what are you hoping to finance?
Second, how’s your cash flow?
Third, what are your business’s vitals?
You’ll need the answers to all of these questions before you can go forward to find small business loans for lawn care companies. Whatever you’re hoping to finance will serve as guide for the type of loan that you want (in terms of how your capital is delivered or accessed). The question of cash flow is crucial to lenders who want to know you’re going to pay back your loan, and your capacity to handle additional expense. And, finally, those business vital signs, so to speak, will help you figure out which landscaping loans you’ll likely qualify for.
We’ll look at all kinds of small business loans for lawn care companies, but keep in mind that if you’re a seasonal business owner, you might want to consider a few extra pieces of info before applying. (We’ll get to these in a bit, hang tight.)
Best Landscaping Business Loan for Updating or Buying New Gear
Among the most common small business loans for lawn care companies is landscaping equipment financing. One of the most capital-intensive parts of owning a landscaping business is buying the equipment you need to get the job done. Maybe that involves small tools, such as shears, or bigger ones like that top-of-the line professional mower we mentioned before. Maybe you need a dedicated shed to store your tools, too.
Whatever your need, landscaping equipment financing can help. If you’ve identified a specific physical asset you want to purchase, you’ll provide the quote to the lender in order for them to approve your request. These loans are also great if you’re worried about putting up additional collateral, because they are what’s known as “self-collateralized.” Simply, that means that the asset you’re financing becomes the loan’s collateral in case of default.
You generally don’t need excellent credit to get a landscaping equipment loan for this reason, nor do you have to have multiple years in business or high revenue. Unlike an equipment lease, an equipment loan enables you buy your equipment outright. So, you’ll want to make sure you use this loan on a piece with a long life, or that won’t get outdated too quickly—especially because the term of these loans generally lasts the life of the equipment.
Best Landscaping Business Loan for Cash Flow
Not many small lawn care businesses are set up to receive automatic payments and, as such, rely heavily on cash. That’s excellent because you don’t need to wait for checks to clear, but can be tough if and when you find yourself waiting on those envelopes from your customers to arrive.
Things like overhead and payroll are affected when you don’t have dependable cash flow. If you have outstanding payments from customers, or are waiting for a big payment to drop, you can look into invoice financing to make sure you can pay for all of your obligations.
With this type of small business loan for lawn care companies, you’ll work with a lender who’ll generally advance you about 85% of the outstanding invoice balance. Then, when your customers pay, the invoice financing company will release the remaining portion, minus fees (usually 3% for the service, and a variable “factor fee” depending on how long you hold the loan).
For many companies, it’s worth it to pay a small fee to be able to have your money ASAP—especially if it’s a matter of keeping the lights on, or making sure your staff doesn’t jump ship to a competitor.
Best Landscaping Business Loan for Borrowers With Strong Credit
SBA loans are generally considered the top-tier of small business loans for lawn care companies—and everyone else. That’s because these loans come with highly favorable terms compared to their counterparts, including long repayment periods and lower interest rates.
Although these loans are named after the U.S. Small Business Administration, they don’t actually come from the government agency. Rather, the SBA guarantees the loan up to 85%, depending on the amount, which means that that means that lenders (often small banks) are able to offer some of the best, most competitive rates available because their risk is lower.
Of course, everyone would opt for an SBA loan if possible, which is why these highly coveted loans are among the most difficult to get. Because lenders can be choosy, they are only awarded to the most qualified business owners. Although the SBA doesn’t specify a required credit score, you’ll historically need a 650 minimum personal credit score. Additionally, these aren’t meant as startup loans, since there is a time-in-business requirement of a few years.
You also don’t want to look into an SBA loan if you need money ASAP, simply because they take quite a lot of paperwork to apply and some time to process. But if you can wait and your business is strong, it’s worth the wait to get hold of an SBA loan.
Best Landscaping Business Loan for Miscellaneous Expenses
A business line of credit is a landscaping company-owner’s best weapon. Why? Because of its wonderful flexibility.
To help you understand this kind of small business loan, you can think of a business line of credit as a hybrid between a business credit card cash advance and a traditional business loan. You’ll work with a lender to be approved like you would with any other type of business loan. You’ll also get approved for a certain amount. The biggest difference here, though, is that this isn’t a lump-sum loan; rather, you will can “draw” against that maximum, and you’ll only pay interest on the amount you’ve used. Most lines of credit are also “revolving,” which means that they re-up once they’re paid back.
Another big advantage of business lines of credit is their interest rates are far less expensive than most business credit cards. You might be approved for a business line of credit with, say, a 9% interest rate, whereas a credit card may have closer to 20%. Plus, business lines of credit can be from the low thousands up into the millions.
These are kind of all-purpose business loans, in the sense that you can draw against your line of credit if you need general working capital, need to make payroll on a specifically busy month, have to purchase an emergency piece of equipment after an unexpected mechanical breakdown, a marketing campaign, or most other common business situations. In other words, they’re helpful in the event of an emergency, or if you want to seize a rare opportunity and need quick access to cash.
The good news is that approval for these kinds of landscaping loans is quick—sometimes even same day. These are also among the top options for seasonal landscaping companies who need to address cash flow issues in their off season.
Speaking of seasonal businesses, let’s talk about special considerations for applying for a small business loan for lawn care if your revenue patterns are cyclical.
Lenders understand seasonality—but they also want to make sure that they get repaid. So, it’s up to you to present the best picture of financial strength you can when applying for a loan. Because many small business loan applications require your last few months of bank statements (usually up to four depending on the lender and the loan), you want to apply for a landscaping business loan when you have the most money in the bank. This could seem counterintuitive, but you want to show consistently strong earnings in your highest months.
You also want to think about which loan you’ll be applying for knowing that your cash flow patterns are cyclical. A loan with a long term could be difficult to pay back in monthly installments if you are only running on your cash reserves in the low season.
With that in mind here are a couple more options:
If you’re worried about having enough cash to pack back a loan with a long term, you might want to look into a <a href=”https://www.fundera.com/business-loans/short-term-business-loans” target=”_blank” rel=”noopener”>short-term loan</a>. True to their name, they operate like traditional lump-sum term loans, but in a shorter period. Think less than a year.
These loans are a bit more expensive than their longer-term counterparts (interest rates around 10%), but the silver lining is that they’re far easier to get approved for with lower credit score, less time-in-business, and lower revenue requirements. If you’re thinking about potentially taking out a lump sum loan, a short-term loan could help you protect your cash reserves for your low season, and you can pay it off as things wind down during peak season.
Finally, you may not have thought of business credit cards as a landscaping business financing tool. But especially for expenses that you’re not able to pay off right away in the off-season, could certainly be the right fit for you.
In this instance, we’re particularly talking about 0% introductory APR credit cards. These types of business credit cards enable you to enjoy a designated period of interest-free spending, which you can use as a kind of loan if you’d like. Of course, you’ll have to pay it back before the end of your intro period, otherwise you’ll start accruing interest. But as these periods are often longer than 12 months, you can take advantage of spending in the off-season and repaying when your revenues are high again.
It takes a lot of… well, care to run a lawn care business. You have to be precise and diligent—but also good with your cash, especially if you run a seasonal operation. But, if you plan your spending and financing, and keep your credit score high, you’ll find lots of options for loans to suit your needs.
Sally Lauckner is the editor-in-chief of the Fundera Ledger and the editorial director at Fundera.
Sally has over a decade of experience in print and online journalism. Previously she was the senior editor at SmartAsset—a Y Combinator-backed fintech startup that provides personal finance advice. There she edited articles and data reports on topics including taxes, mortgages, banking, credit cards, investing, insurance, and retirement planning. She has also held various editorial roles at AOL.com, Huffington Post, and Glamour magazine. Her work has also appeared in Marie Claire, Teen Vogue, and Cosmopolitan magazines.